EUR lost positions against USD on Wednesday. Analysts' expectations were justified and the couple made a test of the support at 1.0915. Its breakthrough was delayed, but short-term indicators are still in favor of USD. EUR/USD will likely focus on the second key level at 1.0817. Wednesday’s trading was opened at a price of 1.1007 and by the end of the session the euro lost 59 pips. Bottom of the day was struck at 1.0930.
EUR/USD: Pair Ignores EU CPI, Trades at Daily Lows
CPI in the euro zone for June decreased to 0.0% from 0.2% month-on-month, while the yearly change printed 0.2%, also down from May's 0.3%, Eurostat advised on Thursday.
The pair did not react much as inflation is still very low to start considering cutting down the QE pace, with it remaining at daily lows, changing hands at around $1.09. The bearish bias is intact since the deal between the euro group and Greece was sealed.
Later in the session, the ECB's monetary policy decision is due, with no changes expected. The post-release presser will attract some attention, however, as Draghi should mostly talk about Greece and ELA for Greek banks.
The greenback strengthened on Wednesday, supported by solid US figures. PPI indices came out above market estimates and dollar bulls cheered the numbers. The monthly change for June came out at 0.4%, down from 0.5% in May, but higher than estimates of a 0.2% print. The year-on-year difference printed -0.7%, better than expectations of -0.9% and a solid improvement from last month's -1.1%.
The dollar also received a boost from somewhat hawkish remarks of Yellen, who said that the central bank is ready to raise rates this year, while not commenting on the exact timing. Market expectations point to the December meeting, but the September rate hike is still in play, should the economic data recover markedly in the coming two months.
"The US dollar is deriving support from widening expectations of monetary divergence between the Fed and other major central banks. Fed Chair Yellen reiterated yesterday that 'if the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy'. The Fed remains optimistic that 'looking forward, prospects are favourable for further improvement in the US labour market and economy more broadly'," analysts at Bank of Tokyo-Mitsubishi wrote in a note on Thursday.
Yesterday the EURUSD fell breaching the 50% Fibonacci level (support) at 1.0955 and closed below it, near the low of the day. This previous day movement suggests that the currency is going to move lower and try to test the 61.8% Fibonacci level (support) at 1.0860.
I dont think the EUR/USD will stop dropping for this week due to the instability in the Euro/Greece crisis.
UR/USD off 1/1-2 month lows on Greece bridging loan
The euro edged higher against the U.S. dollar on Friday, easing off the previous session's one-and-a-half month trough after Greece received a €7 billion bridging loan from the euro zone.
EUR/USD hit 1.0903 during late Asian trade, the session high; the pair subsequently consolidated at 1.0889, easing up 0.12%.
The pair was likely to find support at 1.0853, Thursday's low and a one-a-half month low and resistance at 1.0963, Thursday's high.
The single currency found some support after euro zone ministers agreed on Thursday to give Greece a €7 billion bridging loan from a European Union-wide fund to keep its finances afloat until a bailout is approved.
The loan was expected to be confirmed on Friday by all EU member states.
The news came after the European Central Bank increased its emergency lending to Greek banks by €900 million and added that it is operating under the assumption that Greece will remain in the euro zone.
ECB President Mario Draghi said on Thursday that several positive things have happened to allow the increase in emergency liquidly assistance and that it now appeared that Greece would make the repayment and clear its arrears to the International Monetary Fund.
Meanwhile, demand for the dollar remained broadly supported after Federal Reserve Chair Janet Yellen's two-day testimony before U.S. Congress left investors believing that interest rates will be raised later this year.
However, speaking to the Senate Banking Committee on Thursday, a day after appearing before the House Financial Services Committee, Yellen again avoided specifying exactly when the Fed is likely to start lifting its benchmark rate from near zero.
EUR recorded a second consecutive loss against USD on Thursday. The bearish trend dominated during the whole session as a result of this support at 1.0915 was pierced in the early hours. Short-term indicators remain in favor of USD and it is expected downward direction of the pair to continue until the key levels at 1.0817 and then the price can be corrected. The trading on Thursday launched at 1.0949, and EUR lost 76 pips. Bottom of the day was noted at 1.0855.
Yesterday the EURUSD fell testing the 61.8% Fibonacci level (support) at 1.0860 as expected and closed near the low of the day. The currency is in a critical support and today we may see some consolidation or even a minor pullback. But a break below 61.8% Fibonacci level (support) at 1.0860 would force the price down to a daily support at 1.0622.
EUR/USD: An Uneasy Calm - Credit Suisse
Focus of the day:
"A week ago, markets were braced for an imminent Greek exit from the euro area and the possibility of ongoing financial turbulence in China. Neither has materialized. Consequently, risk appetite has surged.
Fed Chair Yellen's semi-annual testimony to Congress may not have lit the touchpaper to rates markets. But she was clear: if US economic data continue to run in their recent vein, the Fed will have begun tightening by the end of the year.
We agree with Fed Chair Yellen that the overall US recovery is strengthening, with the outlook for consumer spending underpinned by an expanding and tightening labor market and improving credit trends. Therefore, we continue to expect a September 17 rate hike, and, although they would never say it officially, we believe policymakers on the FOMC expect the same.
Our theme of monetary policy divergence is re-emerging. Markets should shift from trading tail risks around Greek headlines and deadlines to focusing on central bank policy action in coming months. That'll mean economic data and central bank rhetoric move back to center stage.
We continue to forecast EURUSD at 1.05 in 3 months and 0.98 in 12 months. Diverging monetary policy between the ECB and the Fed is one of the main reasons for our bearish view. Yet we believe there are also other bearish drivers at play, which go beyond solely what the Fed does in coming months."
A lot of volatility today!
EUR/USD: Greenback Wipes Out Earlier Losses as Core Inflation Strengthens
The US currency strengthened against the euro after US CPI came in line with analysts' projections in the sixth month of the year, the latest data revealed.
The greenback was flat and traded at 1.0865 against the euro, rebounding slightly from negative territory where it had traded ahead of the CPI release.
The CPI data showed inflation in the world's largest economy rose 0.3% month-to-month, following the 0.4% growth in the previous month.
In annual terms the gauge advanced only 0.1%
The headline gauge, excluding food and energy, grew 1.8% year-on-year, compared to a 1.7% hike a month ago.
A monthly figure stripped of the volatile food and energy prices component accelerated slightly as well and showed a 0.2% increase.
Fed committed to hike rates this year
Federal Reserve Chair Janet Yellen said during her latest testimony before Congress that the central bank is sticking to plans to raise short-term interest rates later this year.
"If we wait longer, it certainly could mean that when we begin to raise rates we might have to do so more rapidly," Yellen said. "An advantage to beginning a little bit earlier is that we might have a more gradual path of rate increases."
"Prospects are favorable for further improvement in the U.S. labor market and the economy more broadly," she added.